The allegations made by the former business manager and treasurer of the McKinleyville Community Services District that an embezzlement investigation was not properly handled are false and without merit, according to Manager Tom Marking.

As first reported in last week’s McKinleyville Press, former Business Manager Jim Harding said he was forced to retire after Marking allegedly thwarted his efforts to see that a proper investigation took place. Marking initially declined to comment and referred all questions to MCSD Board President John Corbett.

But last week, Marking spoke about the allegations both during an interview and near the end of the Wednesday, March 19, board meeting.

“We’re very surprised and somewhat disappointed that Mr. Harding would make these allegations in the paper,” Marking said. “We felt that when the incident was brought to our attention, I, as the manager, acted timely.” Marking said he researched the alleged embezzlement, discussed it with the district’s auditor and brought the matter to the Board of Directors. The investigation was properly handled and Harding was kept aware of the details, according to Marking.

Referring to Harding, Marking said “We think he’s reacted in a very unprofessional manner and we think what he’s put in the paper is without merit and when we do respond to him we think we’re going to prove that by and large it’s false and without merit.”

Different accounts

Marking and Harding tell totally different accounts of how the matter was handled.

According to Harding, Marking said he would only conduct a solo investigation into the alleged embezzlement and refused to share his findings.

Harding said he asked that the matter be brought to the County Auditor or the Board of Directors for an investigation. He said he also suggested that the MCSD’s Audit Committee review the matter.

After the Feb. 20 board meeting, during which the matter was discussed in closed session, Harding said that Marking told him that the board didn’t want the auditor involved. When Harding pressed Marking for more information, he said none was forthcoming.

Harding said that as the MCSD’s chief financial officer and treasurer he “had a right” to know what was going on. If he ignored the suspected embezzlement, he could be considered complicit in a cover-up, he said.

‘Sodagate’

At one point in last week’s meeting, board President John Corbett referred to the controversy as “Sodagate,” being that the financial irregularities center around two soda machines at the McKinleyville Activity Center. The MCSD stocks them with beverages. Profits from the machines go to the Parks and Recreation Department budget.

During an interview, Marking suggested that the issue revolved around missing cases of soda, which may have been stolen by kids using the facility.

But in an interview last week, Harding said it appeared that there was missing cash.

The machines, Harding said, were installed at the center in January 2004 – halfway through the fiscal year. Over an 18-month period, from January 2004 to July 2005, the machines generated a profit of about $1,000, Harding said. The next fiscal year, 2005-2006, the machines also made a profit of about $1,000, he said.

But something changed in fiscal year 2006-2007 when the machines were in the red $100, according to Harding. Harding, who oversaw the district’s $4 million budget for the past 11 years, said he first noticed the discrepancy after receiving an invoice for beverages last November and discovering a negative balance in the account for this fiscal year.

Harding said that one employee at the MCSD had keys to the machines and was responsible for emptying the money and bringing the cash to the MCSD office on Sutter Road. Harding has refused to name the suspected employee to the press, saying that doing so would be inappropriate. However, he’s made it clear that it’s not Marking.

$10,000 retainer

Harding said that after demanding a proper investigation, he returned to the office the next day and Marking barred him from entering his office. He was then placed in disciplinary suspension and, the next day, he received a letter from Marking stating that there were allegations he made threats against an unnamed employee. Harding, who denies the allegations, said he felt forced to retire and submitted his paperwork at about 2 p.m. on Tuesday, March 4.

That evening the board met in closed session and, according to President Corbett, agreed to have its auditor review the financial irregularities.

At last week’s meeting, the board was presented with a “Cash Disbursement Detail Report” on its consent calendar, which includes several items identified as “routine in nature.” They are typically approved with a single vote. Director Javan Reid requested that approval of the report be pulled from the consent calendar and questioned the very last expenditure in the document – a $10,000 payment to attorney Jay G. Putnam.

Marking said it was a retainer for an investigation into a “labor complaint.” Marking said that if he receives such a complaint, he is required my MCSD policy to have such an investigation. Given the timing of the complaint, it’s likely that the matter is related to the alleged threats made by Harding, although that couldn’t be confirmed.

The board wasn’t provided with any further details, and voted 3-2 – with Directors Reid and Jeff Dunk dissenting – to approve the expenditure.

Marking’s contract

The board was scheduled to meet in closed session at 6 p.m. at last week’s meeting to discuss Marking’s contract. Before doing so, the board invited public comment, most of which was critical of the general manager.

McKinleyville resident Pat Higgins, who was elected last year as the Fifth District representative to the Humboldt Bay Harbor, Recreation and Conservation District, testified that the allegations made by Harding, if true, were an egregious violation of the manager’s duties. “This is grounds for dismissal for Tom Marking,” Higgins said.

Others made similar comments, with resident Paul Coffman stating “There’s a dark cloud hanging over the MCSD and its board.”

Later, after the board’s closed session, President Corbett announced that no decision was made and consideration of Marking’s contract would continue.

Corbett’s checklist

Near the end of Wednesday’s meeting, Marking’s contract was once again on the agenda. But being that the board had already announced that its consideration was continued, it became another opportunity to address Harding’s allegations.

President Corbett reiterated that because this is a personnel issue, he was “very limited” in what he could say. Rather than address the issue directly, he offered up what he referred to as a “personal checklist” for dealing with such a matter.

The first order of business, he said, is to make sure that public records regarding the matter are secured, something which he said he spent considerable time working on.

“I’ve gotten assurances that the records are safe and secured,” Corbett said.

He also said that because the auditor is involved – a decision he previously said was made by the board on March 4 hours after Harding retired – it “guarantees that there will be a public record.”
But, Corbett said, initially the board will have to exercise caution with the information. The board will need to review the results of the audit with an attorney to consider whether there are any criminal issues that need to be reported. The district’s civil liabilities will also need to be weighed, he said.

He stressed that there was a long, careful process that needs to be followed.

‘Quite sensational’

After Corbett’s comments, Marking addressed the audience regarding the allegations.

“That you for your comments. As for the article in the paper, it’s quite sensational. Some might think it’s informative, some might not,” Marking said. “Let me just say that there’s lots of conjecture about what I did or did not do and how fast I did or did not act.”

Marking said he was notified about the financial irregularities on Feb. 12 and “it only took me a few days to put this all together.” Marking said he came in on the weekend of Feb. 16 and Feb. 17 and conducted the investigation. On Presidents’ Day, Feb. 17, Marking said he met with Board President John Corbett and the district’s auditor to review his findings.

“It was not a board decision, it was my decision, to bring in the auditor,” Marking stated. Marking said he discussed the matter with the board during a closed session on Feb. 20 and then spoke to Harding on Friday, Feb. 22. Marking said Harding was in “total agreement” with how the process was being handled.

“I thought at the time that we were in total agreement,” Marking said.

“Apparently, over the weekend, he had changed his mind,” Marking said.

“Mr. Harding came in on the 27th an acted in a way such that it was unacceptable,” Marking said. Marking said he gave Harding a warning on that day, and then suspended him the next day.

“At no time was he ever told not to talk to anybody. All he was warned about was not to make accusatory statements,” Marking said.

In about a week to a week and a half, Harding will receive a letter from the district, Marking said. He encouraged the press to ask Harding to offer the letter for publication.

“Everything I’ve done is to protect the district, to protect the employees,” Marking.

He ended by asking residents for their patience as the district works to resolve the matter.

Some people in the community are becoming concerned about the large amounts of money being spent on legal fees. They remember that it wasn’t long ago that the district was talking about selling the library building, and wonder about some of the proposed payments to retain Marking.

You might be right dave. But, what if there is a lawsuit being filed against the district? (as indicated in the press article). What kind of lawsuit would cost less then $10,000, which according to the press is how much the mcsd legal fees are?

I don’t think the $10,000 retainer for a labor attorney has actually been spent yet, but you do have to hire a labor attorney if a grievance was filed to protect the district. Could be big bucks if they get sued.